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NCIUA lifts target for new Cape Lookout Re cat bond to $350m


The North Carolina Insurance Underwriting Association (NCIUA) has lifted the upper-end target for its new Cape Lookout Re Ltd. (Series 2022-1) catastrophe bond issuance, with the deal now expected to close at up to $350 million in size.

North Carolina map and flagAt launch, the NCIUA was seeking $300 million or more in collateralized reinsurance protection from the Cape Lookout Re 2022-1 catastrophe bond deal.

It is the fourth in the Cape Lookout Re series of catastrophe bonds for the North Carolina Insurance Underwriting Association (NCIUA), which is a coastal property insurance underwriting pool for the state of North Carolina.

As well as looking set to increase in size, we’re told the pricing for the cat bond looks set to be finalised at the top-end of guidance, another reflection of cat bond investors desires to get paid more for peak US risks such as wind.

We reported back at the beginning of the month that Cape Lookout Re Ltd., the Bermuda special purpose insurer used by NCIUA for its catastrophe bonds, was looking to issue a single, preliminarily sized $300 million tranche of Series 2022-1 Class A notes.

We’re now told that the NCIUA will look to upsize this tranche slightly, with a target of $325 million to $350 million now being discussed by our sources.

The new cat bond will provide the NCIUA with a three year source of collateralized reinsurance against losses from named storms and severe thunderstorms that impact the state of  North Carolina, using an indemnity trigger and on an annual aggregate basis.

The now up to $350 million of Series 2022-1 Class A notes that Cape Lookout Re Ltd. will issue have an initial attachment probability of 1.97% and an initial expected loss of 1.54%.

The notes were first offered to cat bond investors with price guidance in a range from 4.5% to 5%, but we’re now told that the coupon has been fixed at the upper-end of guidance, so the notes will pay investors a 5% coupon, once the size of the issuance is finalised.

The NCIUA’s $450 million Cape Lookout Re Ltd. (Series 2019-1) cat bond matured in February this year, so this new Series 2022-1 issuance will now only partially replace some of that coverage, it appears.

We’ll update our Deal Directory entry for this transaction once the final sizing is known.

You can read all about the Cape Lookout Re Ltd. (Series 2022-1) transaction and every other cat bond in our Artemis Deal Directory.

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